Intellectual Property Infringements due to R&D Abroad? A Comparative Analysis Between Firms with International and Domestic R&D Activities

By internationalising R&D activities, firms can improve their chances to respond to local demands and benefit from local knowledge globally. However, differences in culture and the legal system can challenge firms and lead to higher costs. Furthermore R&D activities abroad are often considered to cause IPR infringements, especially in the case of weak intellectual property protection systems. This paper aims at analysing whether firms with international R&D activities are confronted with a higher risk of intellectual property infringements (IPR) than firms with domestic innovation processes only. The paper differentiates between specific types of infringements: the usage of firms’ technical inventions, product piracy and copying of corporate names and designs. The analysis is based both on a qualitative explorative study which consists of six interviews, involving five German companies active in China and a German legal advisor for intellectual property protection as well as on an empirical study. The empirical study is based on the data of the Mannheimer Innovation Panel (MIP). The explorative study showed that the involved firms disbelieve that R &D activities in China increase the risk of IP infringements, that they all entered the Chinese market with well prepared IP protection and despite the fact that they were all facing IP infringements, these cases turned out to be manageable. The results of the empirical analysis indicate that international innovation activities lead to a higher risk of infringements of technological knowledge. However, firms whose R&D activities are only based in their home countries face an increased risk of product piracy. By differentiating between host countries with weak and strong intellectual property rights, it has been found the effects from both kinds of countries do not vary from each other. A larger scope of innovation processes abroad also causes a higher likelihood of infringements from countries in which the firms innovate abroad. Infringements from countries where the firms do not operate R&D activities are driven by the export intensity of the firm.

Schmiele, Anja (2010), Intellectual Property Infringements due to R&D Abroad? A Comparative Analysis Between Firms with International and Domestic R&D Activities, ZEW Discussion Paper No. 10-099, Mannheim, published in: Research Policy.